CJEU - Recent Developments in Direct Taxation 2025

1. Introduction

The Marks & Spencer ruling is 20 years old. What remains today of the innovative approach to the treatment of cross-border losses by the parent company’s country of residence? In theory, the inability of a British parent company to offset its profits against losses incurred by foreign subsidiaries constitutes a restriction on freedom of establishment, which can be justified on three grounds taken together: preserving the distribution of taxing powers between Member States, the risks of double use of losses and tax evasion. However, these reasons are not sufficient to justify the restriction when the non-resident subsidiary has exhausted all possibilities for taking losses into account in its country of establishment. In other words, losses must be used at least once somewhere. This is a matter of economic common sense.

S. 62In practice, this European case law has given hope to all French cross-border groups benefiting from the tax consolidation regime, which believed they could deduct the “definitive” losses incurred by a non-resident subsidiary from the overall results of the consolidated group in France. However, subsequent European case law and its application by French...